Beyond the Numbers: How to Communicate with your CPA
For nonprofit organizations required to file a Form 990, the filing deadline is the 15th day of the fifth month following the end of your fiscal year. Regardless of when nonprofits are due to file their tax forms, it’s important to take stock of all the information filed annually on the Form 990.
Correctly filing this information is the responsibility of a nonprofit’s leader and board. So, while it may be your CPA who prepares and submits the paperwork, they are only as good as the information you provide them. That’s why it’s critical for nonprofit leaders and boards to communicate with your CPA about not only the numbers, but also the mission and governance of the organization.
Failure to file correct information on the Form 990 can affect tax-exempt status, trigger audits, and incur penalties for inaccurate filing. This form contains a host of information about your organization and governance that goes well beyond the financials. Providing correct information to your CPA on the front end, as well as verifying all forms before submission, falls under the fiduciary responsibility of the board.
We recommend choosing a CPA who specializes in nonprofit filings and developing a routine process for communication changes to the CPA. These are some key areas that your CPA should know about in advance of filing your reports:
● Organizing Documents: Share changes to the certificate of incorporation, bylaws, or policies that impact the Form 990, including updates in board members and officers, your mission statement, and your name or address. The full Form 990 includes multiple questions about governance and policies, and your CPA can’t accurately complete the paperwork without this information.
● Fundraising Sources: When reporting fundraising, update new sources or any changes in annual donation amounts.
● Diversion of Assets: Report any instance of a diversion of assets, including a discovery of embezzlement.
Regarding the organizing documents, remember that your organization’s name, address, and mission statement on the Form 990 must match what was filed on your original Form 1023 filing with the IRS. All too often, organizations will submit paperwork to their Secretary of State’s office to change the name of the organization but then not follow through on checking the box to indicate a name change on their Form 990 or otherwise updating the IRS about the change. Errors in these areas can lead to costly fines, or worse, the loss of your tax-exempt status.
“Errors in these areas can lead to costly fines, or worse, the loss of your tax-exempt status.”
To verify that your information matches, you can download a list of all nonprofits in a specific state from the IRS website. Visit the IRS page and click on your state to download the file, then find your organization in the spreadsheet and verify that all information matches.
We recommend that organizations have a member of the board sign the Form 990 after fully reviewing all details, as filing the report is ultimately part of the board’s fiduciary responsibility to the organization.
In today’s age of electronic filing, the IRS can easily run algorithms to catch errors and screen for audits in ways that it had not in the past. Small errors that formerly went unnoticed are now flagged for audits or assessed fines for inaccurate filing, which will cost your organization both time and money.
By proactively communicating with your CPA throughout the year and ensuring they understand not only your financials but also your mission, governance, and policies, you can improve the accuracy of your Form 990 filing and avoid penalties for errors or outdated information.
